A resistance level is a price point on a chart where upward movement tends to stall, often due to increased selling interest. Technical analysts use resistance to identify potential exit points or reversal zones. When an asset approaches resistance, traders watch for patterns like doji candles, volume spikes, or bearish setups. A breakout above resistance (confirmed by volume and follow-through) can signal a new bullish trend, with the prior resistance often becoming support. However, false breakouts are common, so many traders wait for retests or confirmation. Understanding resistance dynamics helps in timing trades, setting targets, and managing risk effectively.
Example:
A stock repeatedly fails to move above $120, forming a clear resistance zone.
